Is Algorand (ALGO) A Good Investment? In-depth Analysis and Near to Longer-Term Expectations
https://medium.com/algorand/powered-by-consensus-4e32aea5bc86
Is Algorand (ALGO) A Good Investment? In-depth Analysis and Near to Longer-Term Expectations

By CryptoBoomer | Investments | 13 Jan 2020


Next-generation blockchains are all the rage at the moment. Everyone wants a little bit of Bitcoin and Ethereum’s market shares, but the former two have such a head start and made such progress that it is not going to happen without some incredibly unique selling point.

As the top coins happen to control most of the market, new projects - built on next-gen tech - are coming to dethrone these tokens and grab a share of the market with their unique propositions. Most new technology that is being researched and developed has to do with technical improvements arising from different consensus algorithms, better governance mechanisms or particular aspects of the underlying protocol.

These new projects have had a lot of time to build these new solutions, but at the same time they are disadvantaged because the likes of Bitcoin have had years for their blockchain to grow and strengthen. Whether or not they are going to topple Bitcoin is not the question - it’s whether they can carve out a use case for themselves with legitimate improvements in their technology. That is, are their solutions offering something genuinely useful?

The project I’m going to review today is Algorand (ALGO), which is employing new solutions to provide a next generation platform for decentralized finance services. I am going to quickly go over what Algorand is, the history and rise of the project, the many partnerships it has formed, the stellar behind it, as well as general investment advice and an analysis of its price. 

What is Algorand (ALGO)?

Going with the tagline, “creating a borderless economy”, Algorand (ALGO) has a simple goal in mind, even if the technical foundations of the project underpinning the agenda are more complicated.  Essentially, they want to build an infrastructure for a decentralized future where the level of transactions and Dapp usage will be much higher.

The team see Bitcoin’s Proof-of-Work (PoW) algorithm as being unreliable for the future, both in terms of centralization tendencies and computational efficiency. The idea is that Algorand can provide solutions to decentralization, security and scalability that can lead us into commercial level of use.

In terms of the technical elements, Algorand’s Pure Proof-of-Stake consensus and resistance to hard forks are important points. 

The consensus protocol works as follows. Like other Proof-of-Stake (PoS) consensus mechanisms, users get to vote based on how much they have staked. When the voting process comes in (explained below), users are randomly selected and get a chance to vote on a proposal. Both the probability of being selected and the amount of voting weight is proportional to the amount staked. In other words, “the system is secure when most of the money is in honest hands”, as the team describes it. The team thoroughly compares this Pure PoS with other popular mechanisms, like PoW, Delegated Proof-of-Stake (used by EOS) and Bonded Proof-of-Stake (used by Cosmos).

The team has said that hard forks are unlikely on the network, which means all blocks are finalized when validated. But then how are changes made to the protocol?

First, the proposed changes are posted on the blockchain. Then users vote on whether they want to approve the change or not through the consensus protocol. If the majority agrees, the community then decides which block the change which will be incorporated, after they will all switch to the new protocol at the same time.

Several whitepapers have been released by the Algorand team. All of them have been peer reviewed, and they are worth looking at if you are interested in the technology that facilitates Algorand’s technical advantages over other blockchain networks.

Algorand has Quickly Gained a Reputation

A few reasons as to why Algorand is thought of so highly.

Even though it has launched only in 2019 (though the project itself was conceived in 2017), Algorand has quickly gained a positive reputation in the cryptocurrency market and been welcomed by the community. Reaching rank 41 after just year is no small feat. 

In the months before its token launch, Algorand received investment from multiple global VC firms, raising over $60 million from them. While no means a certainty, it shows that there Algorand has the qualities that make it a potentially excellent investment.

Algorand’s investors include Pillar and Union Square Ventures. Union Square has invested in multiple cryptocurrency and tech entities, such as Coinbase, Duolingo, Kickstarter, Protocol Labs and Twitter. The $62 million raised in October 2018 was from over 30 global investment groups, including Polybius Capital, NEO Global Capital and Eterna Capital. 

A recap of Algorand's accomplishments in 2019.

The reputation that Algorand has gained has been accompanied by a lot of development progress. Both the testnet and mainnet were quickly released by the team. 2019 alone has seen the release of the Algorand Vault, a blockchain compression solution that lowers the barrier of entry for joining the network by reducing the storage cost of the blockchain. They have also released Software Development Kits (SDKs) for Go and JavaScript.

Partnerships and Investments

Algorand partners

Some of Algorand’s many partners. Source.

Algorand has formed several notable partnerships and received funding from some big firms in its short lifespan. I’ve listed the most notable of these below.

1. Securitize and Algorand Team Up to Support Support Securitize’s DS Protocol

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Securitize’s agnostic protocol is supported by the Algorand blockchain. Source.

Securitize is a major company in the blockchain space that is building solutions to make digital securities compliant with regulation. This includes solutions include the protocol itself, which is capable of issuing and managing security tokens.

Securitize has teamed up with Algorand to support Securitize’s DS Protocol on the Algorand blockchain. What this means is that users will have an additional platform where they can purchase, issue, trade and manage their securities. 

2. AssetBlock and Algorand will Modernize Real Estate Investment Together

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AssetBlock will tokenize real estate on the Algorand blockchain. Source.

Continuing on the team of asset management, Algorand has teamed up with AssetBlock to help all stakeholders in the real estate ecosystem. Investors will have access to high quality real estate at affordable prices, while real estate ventures will have access to a new monetary channel, helping them grow. The digital transformation means lower fees, smaller investment entry and the potential for better returns.

3. World Chess will Conduct a Hybrid IPO with Algorand’s Assistance

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World Chess Will Release Security Tokens on Algorand. Source.

FIDE is a major governing body in the sport of chess, and organizes the world chess championships. The organization plans to host an IPO eventually, but before that, they want to host a hybrid IPO that involves the sale of security tokens. 

Together with Algorand and Securitize, World Chess will launch a Security Token Offering (STO), selling roughly 5% of the company via this STO. Once the IPO takes place, these shares can be converted into traditional shares. 

4. IDEX to Launch Next Generation Decentralized Exchange on Algorand

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IDEX will launch a next-gen DEX on Algorand. Source.

IDEX, the well known decentralized exchange, has decided to progress with its business strategy using the Algorand blockchain.

The partnership announcement says that the collaboration will see the two parties “work closely together to develop advancements for financial tools and services to support the new economy.” This includes tokenization of assets and programmatic transfers at Layer-1. Complex smart contracts will also be processed on the Algorand blockchain.

5. Flipside Crypto and Algorand Collaborate to Bring Better Analytics to DApps

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Flipside Crypto and Algorand want to Foster Better DApp Development through Analytics. Source.

Flipside Crypto is a market intelligence firm that provides a lot of data and insights into the cryptocurrency market. It uses its own proprietary algorithm to obtain an FCAS score, which evaluates the strength of cryptocurrency projects. The company received a lot of attention last year as CoinMarketCap became the first API distributor of Flipside’s FCAS ratings.

Algorand is working with Flipside Crypto to bring data analytics straight to DApp developers. Previously, developers who have to rely on their own dashboard, which, besides being time consuming and expensive, is not as thorough as what Flipside Crypto provides. Algorand developers will now have access to the firm’s data analytics which will help them develop and grow their DApps.

The Algorand Team

Algorand team

Algorand’s executive team members. Source.

The Algorand team has several members who have accomplished a lot in their respective fields. Being a project with such a strong basis in academic research, Algorand’s team mostly comprises of individuals with a strong research background. It is worth describing some of the more distinguished members of the team.

The project was founded by Silvio Micali, a recipient of the Turing Award and Godel Prize. Micali is a member of the National Academy of Sciences, the National Academy of Engineering, the American Academy of Arts and Sciences and Accademia dei Lincei. Most importantly, however, has conducted research in cryptography and is the co-inventor of zero-knowledge proofs, the latter being a key research area in the cryptocurrency space. Micali oversees all research, including theory, security and crypto finance for Algorand.

The project’s Chief Executive Officer (CEO), Steve Kokinos, is an entrepreneur who has founded two companies, Fuze, BladeLogic and Web Yes. He is responsible for overall vision and business strategy. 

Lastly, Naval Ravikant advises the project. Ravikant is the Chairman and co-founder of AngelList and founder of CoinList, besides being a founder and partner at MetaStable Capital. He has been a seed investor for numerous big name companies, including Twitter, Uber, Wish, Kraken, Stack Overflow, Protocol Labs and BlockStack.

 

Price History

ALGO price

The AlGO token’s price at the time of publishing. Source.

Algorand launched in June 2018, and early days saw quite a high price of $2.40 - that’s much higher than a lot of tokens. Algorand raised a total of $60 million in this ICO sale, selling 25 million tokens at the aforementioned price. In what is something like a power move, the ICO token sale occurred at the same time as Algorand’s mainnet launch. 

The story since then has been that of a fall . For ICOs, you generally don’t want to invest in tokens with such a high price, as they typically only go down in value in the short and medium term. The long term price chart might tell a different story, but to go up from such a price would take an enormous shift in the market’s momentum, and we are not quite there yet.

ALGO price chart

The AlGO token’s price chart. Source.

There are about 3 billion ALGO tokens in total, with just above 500 million currently in circulation. The token hit its all time high of $3.28 in June 2019 and all time low of $0.17 in September 2019. 52 week highs and lows are the same.

That’s quite a difference in price and it has occurred quickly, so ICO investors must be feeling the burn now. That’s an enormous drop and could have discouraged investors who might have poured a lot of money in at the start.

But that does make Algorand a bad investment? Are the investors who are still backing it in it for the long haul? Obviously, it’s better to buy at the lowest price point possible, but is there any potential at all, given the rather disappointing last few months?

Investment Potential 

Algorand 2.0

Algorand is set to offer many more features in the near future. Source.

Algorand certainly has substance to it. It seems like if any investment returns comes out of it, it’s going to be in the long term. 

Is there investment potential in Algorand and its ALGO token? Absolutely. There’s no doubt about that, given that it is one of the few projects that is actually backing up its claims of being a next-gen platform with actual results. You might have seen a lot of projects saying things like this, but Algorand is actually providing demonstrations of the improvements.

That’s not to say you should throw all of your money into Algorand. There are no guarantees in the crypto market. I remember the time (about a year or two ago) where people said that XRP would hit $10 in a few years. It’s currently at $0.21. 

You have to look at the long term and ignore what profits you can make in the short term - even medium term for some projects. The numerous partnerships, the amount of VC funds pouring in and the collaborative building of decentralized applications (DApps) lends some credence to Algorand.

If you’re going to invest in it, don’t invest too much and HODL. Dollar-cost average and make Algorand make one of those long-term potential moonshots that you’ve budgeted some portion of your portfolio for.

Conclusion

Algorand is an interesting project that is worth monitoring for the next few years. There are several use cases that have already been formed and are being tested, and it is pushing for improvements in decentralization and security. The Pure Proof-of-Stake (PoS) is an interesting feature that sets it apart from competitors, and to a lesser degree, so does its protocol change mechanisms. It’s all down to community.

The Algorand 2.0 platform also looks very promising, and should things go well, could bring Algorand much higher in terms of market cap. But, of course, everything is speculation at this point.

What you should take away is this: Algorand has work ethic, a solid business strategy and the technology to give one some confidence about it as an investment. These are the cornerstones of any business, let alone cryptocurrency platform, and that makes Algorand a worthwhile consideration. 

If you’re willing to go after an altcoin that is yet to fully prove itself, but has the potential to grow much more, then Algorand is a reasonable investment. If your risk appetite is very low, then stick to the major tokens that you know are going to grow more in the long run.




CryptoBoomer
CryptoBoomer

Always DYOR :)


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